Buying A Home: Your How To Guide, Spring 2015

THINGS TO CONSIDER WHEN
BUYING A HOME
SPRING 2015
EDITION
Lori Koschnick, Realtor

Certified Residential Specialist
PHONE/TEXT 920-901-4373
www.LoriKoschnick.ColdwellHomes.com
TABLE OF CONTENTS
1
4 REASONS TO BUY YOUR HOME NOW
BUYING A HOME? CONSIDER COST NOT JUST PRICE
YOU NEED A PROFESSIONAL WHEN BUYING A HOME
HOME PRICES OVER THE LAST YEAR
WHERE ARE MORTGAGE INTEREST RATES HEADED?
GETTING A MORTGAGE: WHY SO MUCH PAPERWORK?
RENTERS VIEWS OF HOMEOWNERSHIP
WHERE ARE PRICES HEADED OVER THE NEXT 5 YEARS?
10
5 REASONS TO HIRE A REAL ESTATE PROFESSIONAL
11
HARVARD: 5 FINANCIAL REASONS TO BUY A HOME
13
HOMEOWNERSHIPS IMPACT ON NET WORTH
14
4 DEMANDS TO MAKE ON YOUR REAL ESTATE AGENT
16
GALLUP POLL: RE BEST LONG TERM INVESTMENT
17
HOMEOWNERSHIP STILL THE AMERICAN DREAM
4 REASONS TO BUY YOUR HOME NOW!

Here are four great reasons to consider buying a home today instead of waiting.
1. Prices Will Continue to Rise
The Home Price Expectation Survey polls a distinguished panel of over 100 economists,
investment strategists, and housing market analysts. Their most recent report projects
appreciation in home values over the next five years to be between 11.7% (most pessimistic) and
27.5% (most optimistic).
The bottom in home prices has come and gone. Home values will continue to appreciate for
years. Waiting no longer makes sense.
2. Mortgage Interest Rates Are Projected to Increase

Although Freddie Macs Primary Mortgage Market Survey shows that interest rates for a 30-year
mortgage have softened recently, most experts predict that they will begin to rise over the next
12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac & the National
Association of Realtors are in unison projecting that rates will be up approximately three quarters
of a percentage point over the next 12 months.
An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be
more a year from now if a mortgage is necessary to purchase your next home.
KEEPINGCURRENTMATTERS.COM
Lori Koschnick ABR, CRS, ePRO, GRI

3. Either Way You are Paying a Mortgage

As a recent paper from the Joint Center for Housing Studies at Harvard University explains:
Households must consume housing whether they own or rent. Not even accounting for more
favorable tax treatment of owning, homeowners pay debt service to pay down their own
principal while households that rent pay down the principal of a landlord plus a rate of
return. Thats yet another reason owning often doesas Americans intuitend up making
more financial sense than renting.
4. Its Time to Move On with Your Life

The cost of a home is determined by two major components: the price of the home and the
current mortgage rate. It appears that both are on the rise.
But, what if they werent? Would you wait?
Look at the actual reason you are buying and decide whether it is worth waiting. Whether you
want to have a great place for your children to grow up, you want your family to be safer or
you just want to have control over renovations, maybe it is time to buy.
If the right thing for you and your family is to purchase a home this year, buying sooner
rather than later could lead to substantial savings.

BUYING A HOME?
CONSIDER COST NOT JUST PRICE
As a seller, you will be most concerned about short term price where home values are
headed over the next six months. As a buyer, you must be concerned not about price but
instead about the long term cost of the home. Let us explain.
The Mortgage Bankers Association (MBA), the National Association of Realtors, Fannie Mae and
Freddie Mac all projected that mortgage interest rates will increase by approximately three
quarters of a percentage point over the next twelve months. Many experts are calling for
home prices to also increase over the next year.
What Does This Mean as a Buyer?
Here is a simple demonstration of what impact an interest rate increase would have on the
mortgage payment of a home selling for approximately $250,000 today if home prices
appreciate by the 4.4% predicted by the experts in the Home Price Expectation Survey:
Mortgage
Interest Rate
Payment (P&I)
Today
$250,000
3.86%
$1,173.45
Next Spring
$261,000
4.7%
$1,353.64
Difference in Monthly Payment
$180.19
Monthly
Annually
Over 30 Years
$180.19
$2,162.28
$64,868

YOU NEED A PROFESSIONAL

WHEN BUYING A HOME
Many people wonder whether they should
hire a real estate professional to assist
them in buying their dream home or if they
should first try to go it on their own. In
todays market: you need an experienced
professional!
You Need an Expert Guide if You Are
Traveling a Dangerous Path
The field of real estate is loaded with land
mines. You need a true expert to guide you
through the dangerous pitfalls that
currently exist. Finding a home that is
priced appropriately and ready for you to
move in to can be tricky. An agent listens to
your wants and needs, and can sift out the
homes that do not fit within the
parameters of your dream home.
You Need a Skilled Negotiator
In todays market, hiring a talented negotiator could save you thousands, perhaps tens of
thousands of dollars. Each step of the way from the original offer, to the possible
renegotiation of that offer after a home inspection, to the possible cancellation of the deal
based on a troubled appraisal you need someone who can keep the deal together until
it closes.
Realize that when an agent is negotiating their commission with you, they are negotiating
their own salary; the salary that keeps a roof over their familys head; the salary that puts
food on their familys table. If they are quick to take less when negotiating for themselves and
their families, what makes you think they will not act the same way when negotiating for you
and your family? If they were Clark Kent when negotiating with you, they will not turn into
Superman when negotiating with the buyer or seller in your deal.
Bottom Line
Famous sayings become famous because they are true. You get what you pay for. Just like a
good accountant or a good attorney, a good agent will save you moneynot cost
you money.

HOME PRICES OVER THE LAST YEAR

Every quarter, the Federal Housing Finance Agency (FHFA) reports on the Year-over-Year changes in
home prices. Below you will see that prices are up, year-over-year broken down by region.
Year-over-Year Prices Regionally
Looking at the breakdown by state, you can see that each state is appreciating at different rates. This
is important to know if you are planning on relocating to a different area of the country. Waiting to
move may end up costing you more!
Year-over-Year Prices By State

WHERE ARE MORTGAGE INTEREST

RATES HEADED?
The interest rate you pay on your home mortgage has a direct impact on your monthly
payment. The higher the rate the greater the payment will be. That is why it is important to
look at where rates are headed when deciding to buy now or wait until next year.
Below is a chart created using Freddie Macs 2015 U.S. Economic & Housing Marketing Outlook.
As you can see interest rates are projected to increase steadily over the course of 2015.
How Will This Impact Your Mortgage Payment?
Depending on the amount of the loan that you secure, a half of a percent (.5%) increase in
interest rate can increase your monthly mortgage payment significantly.
Waiting to secure the home of your dreams may mean having to tighten the budget, or
sacrificing on luxuries that may be taken for granted today.
The experts predict that home prices will appreciate by 4.4% over the course of 2015. If both
predictions become reality, families would wind up paying considerably more for their home.
Bottom Line
Even a small increase in interest rate can impact your familys wealth. Meet with a local real
estate professional to evaluate your ability to purchase your dream home.

GETTING A MORTGAGE:
WHY SO MUCH PAPERWORK?
Why is there so much paperwork mandated by
the bank for a mortgage loan application when
buying a home today? It seems that the bank
needs to know everything about us and
requires three separate sources to validate
each and every entry on the application form.
Many buyers are being told by friends and
family that the process was a hundred times
easier when they bought their home ten to
twenty years ago.
There are two very good reasons that the loan
process is much more onerous on todays
buyer than perhaps any time in history.
1. The government has set new guidelines that now demand that the bank prove beyond any
doubt that you are indeed capable of paying the mortgage.
During the run-up in the housing market, many people qualified for mortgages that they could never
pay back. This led to millions of families losing their homes. The government wants to make sure this
cant happen again.
2. The banks dont want to be in the real estate business.
Over the last seven years, banks were forced to take on the responsibility of liquidating millions of
foreclosures and also negotiating another million+ short sales. Just like the government, they dont
want more foreclosures. For that reason, they need to double (maybe even triple) check everything on
the application.
However, there is some good news in the situation.
The housing crash that mandated that banks be extremely strict on paperwork requirements also
allowed you to get a mortgage interest rate probably around 4%.
The friends and family who bought homes ten or twenty years ago experienced a simpler mortgage
application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was
8.12% in the 1990s and 6.29% in the 2000s).
If you went to the bank and offered to pay 7% instead of approximately 4%, they would probably bend
over backwards to make the process much easier.
Bottom Line
Instead of concentrating on the additional paperwork required, lets be thankful that we are able to
buy a home at historically low rates.

RENTERS VIEWS OF HOMEOWNERSHIP

Freddie Mac recently released their Perceptions of Renting and Homeownership Study in which
they surveyed more than 2,000 Americans on renting in the post financial crisis market.
Their goal was to learn about renters preferences toward the housing choices available to
them, the constraints preventing them from obtaining housing that they think would better
suite their needs and the drivers for their decisions.
Renters were asked to indicate how much they agree or disagree with statements about
homeownership. Not surprising was the fact that the top 12 responses represented a large
amount of non-financial reasons to own a home.
Here are the top responses broken into the Financial & Non-Financial Aspects.
Non Financial Aspects

It is something to be proud of
91%
It can be passed on to your children
90%
It allows more flexibility to design it the way you want
89%
It gives you more privacy
86%
It gives you more independence and control
81%
It provides a better home life for children
76%
It is a sign of success
76%
It makes you feel more like part of a community
74%
It allows you to live in a better, safer neighborhood
60%
Financial Aspects
86%
80%
77%
Homeownership
provides protection
against rent increases
Homeownership is an
investment opportunity that
builds long-term wealth
Homeownership
provides stability and/or
financial security
Bottom Line
No matter what reasons ring true with you, meeting with a local real estate professional to
evaluate your situation is the first step on the path to obtaining everything on this list.

WHERE ARE PRICES HEADED OVER THE

NEXT 5 YEARS?
Today, many real estate conversations center on
housing prices and where they may be headed.
That is why there is tremendous value in the
Home Price Expectation Survey. Every quarter,
Pulsenomics surveys a nationwide panel of more
than 100 economists, real estate experts and
investment & market strategists about where
prices are headed over the next five years.
They then average the projections of all 100+
experts into a single number.
The results of their latest survey:
Values appreciated by 4.4% in 2015
Cumulative appreciation will be 19.3% by 2019
That means the average annual appreciation will
be 3.6% over the next 5 years.
Even the experts making up the most bearish
quartile of the survey still are projecting a
cumulative appreciation of almost 11.7% by 2019
Individual opinions make headlines. This survey

is a fair depiction of future values.

Reasons to Hire a
Real Estate Professional
They help with all disclosures and paperwork
necessary in todays heavily regulated environment.
They are well educated in and experienced with the

entire sales process.
They act as a buffer in negotiations with all parties
throughout the entire transaction.
They help understand todays real estate values when
setting the price on a listing or on an offer to purchase.
They simply and effectively explain todays real estate
headlines and decipher what they mean to you.

HARVARD: 5 FINANCIAL REASONS TO BUY A HOME

Eric Belsky is Managing Director of the Joint Center of Housing Studies at Harvard University. He
authored a paper on homeownership - The Dream Lives On: the Future of Homeownership in
America. In his paper, Belsky reveals five financial reasons people should consider buying a home.
Here are the five reasons, each followed by an excerpt from the study:
1.) Housing is typically the one leveraged investment available.
Few households are interested in borrowing money to buy stocks and bonds and few lenders are
willing to lend them the money. As a result, homeownership allows households to amplify any
appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down
payment results in a leverage factor of five so that every percentage point rise in the value of
the home is a 5 percent return on their equity. With many buyers putting 10 percent or less
down, their leverage factor is 10 or more.
2.) Youre paying for housing whether you own or rent.

Homeowners pay debt service to pay down their own principal while households that rent pay
down the principal of a landlord.

3.) Owning is usually a form of forced savings.

Since many people have trouble saving and have to make a housing payment one way or the
other, owning a home can overcome peoples tendency to defer savings to another day.
4. There are substantial tax benefits to owning.
Homeowners are able to deduct mortgage interest and property taxes from income...On top
of all this, capital gains up to $250,000 are excluded from income for single filers and up to
$500,000 for married couples if they sell their homes for a gain.
5.) Owning is a hedge against inflation.
Housing costs and rents have tended over most time periods to go up at or higher than the
rate of inflation, making owning an attractive proposition.
Bottom Line
We realize that homeownership makes sense for many Americans for many social and family
reasons. It also makes sense financially.

HOMEOWNERSHIPS IMPACT ON NET WORTH

Over the last six years, homeownership has
lost some of its allure as a financial
investment. As homeowners suffered
through the housing bust, more and more
began to question whether owning a home
was truly a good way to build wealth. A
study by the Federal Reserve formally
answered this question.
Two of the findings revealed in their report:
A homeowners net worth is over thirty-six
times greater than that of a renter.
The average homeowner has a net worth of
$195,400 while the average net worth of a
renter is $5,400.
Bottom Line
The Fed study found that homeownership is
still a great way for a family to build wealth
in America.

4 DEMANDS TO MAKE ON YOUR

REAL ESTATE AGENT
Are you thinking of buying a home? Are you dreading having to walk through strangers houses?
Are you concerned about getting the paperwork correct? Hiring a professional real estate agent
can take away most of the challenges of buying. A great agent is always worth more than the
commission they charge just like a great doctor or great accountant.
You want to deal with one of the best agents in your marketplace. To do this, you must be able
to distinguish the average agent from the great one.
Here are the top 4 demands to make of your real estate agent when buying a home:
1. Tell the Truth About the Price

Too many agents just take your offer at any price and then try to work both the seller and
you while negotiating later. Demand that the agent prove to you that they have a belief in the
price you are offering. Make them show you their plan to get both the seller - and the bank - to
accept that price. Every house in todays market must be sold two times first to you and then
to your bank.
The second sale may be more difficult than the first. The residential appraisal process has
gotten tougher. A recent survey showed that there was a challenge with the appraisal on 24% of
all residential real estate transactions. It has become more difficult to get the banks to agree
on the contract price. A red flag should be raised if your agent is not discussing this with you at
the time of the original offer.

2. Understand the Timetable with which Your Family is Dealing

You will be moving your family into a new home. Whether the move revolves around the start
of a new school year or a new job, you will be trying to put the move to a plan.
This can be very emotionally draining. Demand from your agent an appreciation for the
timetables you are setting. Your agent cannot pick the exact date of your move, but they
should exert any influence they can, to make it work.
3. Remove as Many of the Challenges as Possible
It is imperative that your agent knows how to handle the challenges that will arise. An
agents ability to negotiate is critical in this market.
Remember: If you have an agent who was weak negotiating with you on parts of the purchase
offer, dont expect them to turn into a super hero when they are negotiating with the seller
for you and your family.
4. Find the Right HOUSE!
There is a reason you are putting yourself and your family through the process of moving.
You are moving on with your life in some way. The reason is important or you wouldnt be
dealing with the headaches and challenges that come along with purchasing. Do not allow
your agent to forget these motivations. Constantly remind them that finding the right house
is why you hired them. Make sure that they dont worry about your feelings more than they
worry about your family. If they discover something needs to be done to attain your goal (i.e.
rethinking price), insist they have the courage to inform you.
Good agents know how to deliver good news. Great agents know how to deliver tough
news. In todays market, YOU NEED A GREAT AGENT!

GALLUP POLL: RE BEST LONG TERM INVESTMENT

The Gallup organization released their Economy and Personal Finances Poll which asked
Americans to choose the best option for long term investment. It was no surprise that real
estate returned to the top position over other investment categories (gold, stocks/mutual
funds, savings accounts/CDs and bonds).
Back in 2011, gold was the most popular long-term investment among Americans. However,
with the housing market improving across the U.S. and home prices rising, more Americans
now consider real estate the best option for long-term investments.
The poll also revealed that real estate was considered to be the best long term investment by
all four subgroups by age and two out of three by income:
By Age Group
First Choice
Second Choice
18-29 years
Real Estate 25%
Stocks/Mutual Funds 24%
30-49 years
Real Estate 34%
50-64 years
Real Estate 30%
Gold 28%
65+ years
Real Estate 31%
First Choice
Second Choice
$75k and over
Real Estate 38%
$30k to $74,999
Real Estate 26%
Gold 26%
Less than $30k
Gold 31%
Real Estate 28%
By Income

HOMEOWNERSHIP STILL THE AMERICAN DREAM

There has been some who have voiced doubt as to
whether or not the younger generations still
consider buying a home as being part of the
American Dream. A recent study by Merrill
Lynch puts that doubt to rest. According to their
research, every living generation still maintains
that owning a home is in fact important.
(The results are on the right)
This should not surprise us as many studies have

revealed the benefits of homeownership enjoyed
by the families who own their own home. One such
study was done by the Joint Center of Housing
Studies at Harvard University that addressed a
major financial benefit to owning your own home:
forced savings. The report explains:
Since many people have trouble saving and have
to make a housing payment one way or the other,
owning a home can overcome peoples tendency to
defer savings to another day.
The Merrill Lynch study proves this point with the

home equity data on the right (a form of savings).
Bottom Line
There are many reasons that owning a home makes sense. The financial reasons are powerful.
As one participant in the Merrill Lynch study put it:
When I was younger, I always worried about that monthly mortgage payment. Now that I am
retired, I have the peace of mind of knowing I own my home free and clear.

CONTACT ME TO TALK MORE

Im sure you have questions and concerns
I would love to talk with you more about what you read here, and help you on the path to
buying a home. My contact information is below. I look forward to hearing from you

Coldwell Banker, The Real Estate Group Inc.
info@LoriKoschnick.Realtor
LoriKoschnick.ColdwellHomes.com
PHONE/TEXT 920-901-4373
Facebook.com/HomewardBoundPro

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THINGS TO CONSIDER WHEN

Lori Koschnick, Realtor

4 REASONS TO BUY YOUR HOME NOW

BUYING A HOME? CONSIDER COST NOT JUST PRICE

YOU NEED A PROFESSIONAL WHEN BUYING A HOME

HOME PRICES OVER THE LAST YEAR

WHERE ARE MORTGAGE INTEREST RATES HEADED?

GETTING A MORTGAGE: WHY SO MUCH PAPERWORK?

RENTERS VIEWS OF HOMEOWNERSHIP

WHERE ARE PRICES HEADED OVER THE NEXT 5 YEARS?

5 REASONS TO HIRE A REAL ESTATE PROFESSIONAL

HARVARD: 5 FINANCIAL REASONS TO BUY A HOME

HOMEOWNERSHIPS IMPACT ON NET WORTH

4 DEMANDS TO MAKE ON YOUR REAL ESTATE AGENT

GALLUP POLL: RE BEST LONG TERM INVESTMENT

HOMEOWNERSHIP STILL THE AMERICAN DREAM

4 REASONS TO BUY YOUR HOME NOW!

2. Mortgage Interest Rates Are Projected to Increase

Lori Koschnick ABR, CRS, ePRO, GRI

3. Either Way You are Paying a Mortgage

4. Its Time to Move On with Your Life

Lori Koschnick ABR, CRS, ePRO, GRI

Difference in Monthly Payment

Lori Koschnick ABR, CRS, ePRO, GRI

YOU NEED A PROFESSIONAL

Lori Koschnick ABR, CRS, ePRO, GRI

HOME PRICES OVER THE LAST YEAR

Year-over-Year Prices Regionally

Year-over-Year Prices By State

Lori Koschnick ABR, CRS, ePRO, GRI

WHERE ARE MORTGAGE INTEREST

Lori Koschnick ABR, CRS, ePRO, GRI

Lori Koschnick ABR, CRS, ePRO, GRI

RENTERS VIEWS OF HOMEOWNERSHIP

Non Financial Aspects

It can be passed on to your children

It allows more flexibility to design it the way you want

It gives you more privacy

It gives you more independence and control

It provides a better home life for children

It makes you feel more like part of a community

It allows you to live in a better, safer neighborhood

Lori Koschnick ABR, CRS, ePRO, GRI

WHERE ARE PRICES HEADED OVER THE

Individual opinions make headlines. This survey

Lori Koschnick ABR, CRS, ePRO, GRI

They are well educated in and experienced with the

Lori Koschnick ABR, CRS, ePRO, GRI

HARVARD: 5 FINANCIAL REASONS TO BUY A HOME

2.) Youre paying for housing whether you own or rent.

Lori Koschnick ABR, CRS, ePRO, GRI

3.) Owning is usually a form of forced savings.

Lori Koschnick ABR, CRS, ePRO, GRI

HOMEOWNERSHIPS IMPACT ON NET WORTH

Lori Koschnick ABR, CRS, ePRO, GRI

4 DEMANDS TO MAKE ON YOUR

1. Tell the Truth About the Price

Lori Koschnick ABR, CRS, ePRO, GRI

2. Understand the Timetable with which Your Family is Dealing

Lori Koschnick ABR, CRS, ePRO, GRI

GALLUP POLL: RE BEST LONG TERM INVESTMENT

Real Estate 25%

Stocks/Mutual Funds 24%